Loan size growth and sustainability in village banking programmes
This article examines why the size of average loans in two Latin American village banks has not grown as much as was anticipated – and hoped for. It emerges that some of the demand for credit is met by the village banks' 'internal fund', which reduces the amount that is sought from programme funds. There is also a high level of membership turnover in the bank's early years, contributing to a large proportion of new borrowers with small loans. The article describes new measures to increase membership loyalty and borrowing from programme funds, including greater flexibility in repayments and savings-only accounts. It also recommends training poor borrowers in rural areas to make better use of their working capital.
Crossfire: ‘Building financial capabilities should be product-linked and not focused on personal money management’
In this issue's Crossfire, Kathleen Stack and Jennefer Sebstad debate whether a product-linked approach is the best way to deliver financial education.